Investors rate the UK higher than other financial centres such as New York, Zurich, Hong Kong and Singapore, for private banking and wealth management (PBWM) services, but the government needs to ensure that regulation and related high expenses do not have a disproportionate affect on the sector.
Findings of a new report from the British Bank Association (BBA) have revealed that both UK and non-UK passport holders vote for London as the most attractive banking centre for PBWM.
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Supported by the Wealth Management Association (WMA), the BBA’s Wealth of Opportunities report – surveying more than 250 investors worth over £1 million each – additionally reveals that majority of investors were more likely to invest and do business in Britain as a result of having their assets managed by wealth managers or private bankers in the UK.
However the government and regulators in the UK need to be prepared to ward off challenges, suggests the report.
Liz Field, Chief Executive of the WMA, said: "It is crucial that the Government continues to ensure the sector’s world-leading position, which faces significant regulatory challenges, so that the investment the industry promotes continues to grow in the years ahead."
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By GlobalDataThe PBWM boost
Despite challenges, the UK’s PBWM industry oversaw £524 billion ($948bn) in 2013, with a year-on-year growth of 11.4%, and contributed £5.5 billion a year to the economy.
The firms and employees in the PBWM sector paid a combined £1.2 billion in taxes in 2013, an equivalent of £19 for each individual living in the UK.
The PBWM sector has also had a highly-productive workforce as each employee made a £138,000 gross value added contribution to UK GDP on average in 2013 – a figure that is more than three times higher than average productivity in the UK economy the same year, the Wealth of Opportunities report highlights.
Anthony Browne, BBA’s chief executive, said: "Our report shows how the benefits of private banking reach well beyond those who use these services, helping our country to attract and retain inward investors- creating jobs and growth.
"That’s why it’s in all our interests to help support this sector; and why we are calling on politicians and regulators to ensure that they avoid taking measures that could damage this enviable position."
Existing hurdles
The fast widening advice gap, however, is a barrier to the sector remaining as attractive, according to the report.
Individuals in lower wealth bands either cannot access advisory services, or are unable to afford financial advice due to increasing costs of regulation, which poses a challenge.
Continued low interest rates can also potentially be a challenge as many firms, particularly private banks, are heavily reliant on net interest income, and many players could increase their fees to sustain the revenue stream, as a consequence, the report says.
Other key findings from the report:
- Investment managers remain the most profitable wealth manager type with profit margins of 29.4%, while full service wealth managers overtake private banks and step into third place with 23.8%
- The PBWM sector made a £3.2bn gross value added contribution to UK GDP in 2013
- Including direct, indirect, and induced economic impacts, the PBWM sector supported 65,700 jobs in the UK in 2013. That is one in every 490 jobs in the UK, and roughly equal to employment in the entire economies of St. Albans or Ipswich
- Absolute pre-tax profit across all wealth managers grew significantly in 2013 and hit a new record of £1.15bn, up from £0.95bn in 2012
